How do I know if an HOA is doing alright or headed for bankruptcy?

Question

I am looking to start purchasing some condos that are on the cheaper side of things (really cheap)... After verifying the condition of the unit itself my final unknown is the HOA, and is a major concern of mine. I have heard horror stories about HOAs going bankrupt and don't want to be part of one of those stories in the future. Are there signs that can alert me of the condition of the HOA, good or bad? Is there information that I can request that would help, and of this information what are the key line items that would help me make the call?

Any input is greatly appreciated. Please help!!!

Answer 1

In 1990 there were a ton of HOA's that had zero money.  Any buyer was walking into a big mess.  Some units had the fee raised to $800 for 3 months.  that will wipe out any rental profit.  YOu can get the latest balance sheet at the HOA management company.  You can get that name from a condo owner, any local helpful realty agent, or any escrow company. All for free. /

Answer 2

All homeowners in an HOA are entitled to regular financial statements. They mail them (usually quarterly) to all homeowners. As a prospective purchaser, you should be able to get a copy of the latest statement through your agent. Look at their operating expenses and how much cash is held in reserve.  There should be a healthy reserve of several months operating expenses. An HOA of several hundred homes might have a million or two in reserve depending on the facilities and grounds it maintains. These statements along with the condition of the common grounds and facilities that the HOA maintains are your best indication on how good the HOA is managed.  You might also talk with existing homeowners (prospective neighbors) on how the HOA is managed.